Income inequality and financial overconfidence

IF 0.9 4区经济学 Q3 ECONOMICS

American Journal of Economics and Sociology Pub Date : 2024-09-12 DOI:10.1111/ajes.12603

Aron Gottesman, Matthew Morey

引用次数: 0

Abstract

In this paper, we examine the relationship between income inequality and overconfidence. Using data from the FINRA Foundation's National Financial Capability Study, we measure respondents' self-perceived and actual investment knowledge and thus identify overconfident individuals. We also identify for each respondent their U.S. state of residence and the corresponding state-level income inequality. We then examine the relationship between state-level income inequality and overconfidence of the survey participants. Using a number of controls, several overconfidence measures, and two different datasets we find a positive and significant relationship between income inequality and overconfidence. We also find evidence that income inequality is positively related to financial satisfaction and financial risk taking. Indeed, we find that as inequality increases, poorer individuals increase their risk willingness.

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来源期刊

American Journal of Economics and Sociology Multiple-

CiteScore

1.90

自引率

12.50%

发文量

期刊介绍： The American Journal of Economics and Sociology (AJES) was founded in 1941, with support from the Robert Schalkenbach Foundation, to encourage the development of transdisciplinary solutions to social problems. In the introduction to the first issue, John Dewey observed that “the hostile state of the world and the intellectual division that has been built up in so-called ‘social science,’ are … reflections and expressions of the same fundamental causes.” Dewey commended this journal for its intention to promote “synthesis in the social field.” Dewey wrote those words almost six decades after the social science associations split off from the American Historical Association in pursuit of value-free knowledge derived from specialized disciplines. Since he wrote them, academic or disciplinary specialization has become even more pronounced. Multi-disciplinary work is superficially extolled in major universities, but practices and incentives still favor highly specialized work. The result is that academia has become a bastion of analytic excellence, breaking phenomena into components for intensive investigation, but it contributes little synthetic or holistic understanding that can aid society in finding solutions to contemporary problems. Analytic work remains important, but in response to the current lop-sided emphasis on specialization, the board of AJES has decided to return to its roots by emphasizing a more integrated and practical approach to knowledge.